Executive Vice President Mitsuru Takahashi said earnings were weighed down by foreign exchange losses attributed to the yen’s rise against the dollar and other currencies and by steeper incentives to move cars in a slowing North American market.

Fuji Heavy’s sliding profits in the current fiscal year break a string of stellar earnings.

In the previous fiscal year ended March 31, 2016, the company logged a third straight year of record results on booming U.S. sales and big gains from favorable currency rates. But the yen has since reversed course, strengthening against other currencies.

Like other Japanese automakers, Fuji Heavy is being hammered by the yen’s appreciation. The more expensive yen erodes the profits Fuji Heavy and others make on vehicles sold overseas. At Subaru, swinging foreign exchange rates chopped $359 million off Fuji Heavy’s operating profit in the third quarter.

Recalling vehicles fitted with faulty Takata airbag inflators also hurt. Fuji Heavy took a $118.2 million charge to settle Takata claims in the quarter.

The inflators, which can be prone to explode when exposed for long periods to heat and humidity, are part of one of history’s biggest automotive callbacks, affecting millions of vehicles worldwide and almost every major auto manufacturer.

North America

North American sales, however, remained robust, driven by a 12 percent increase in U.S. sales to 174,400 vehicles in the quarter. But rising incentive spending undercut profitability.

Average outlays in the U.S. rose to around $1,700 per vehicle in the quarter, Takahashi said.

In price competition worsens in the passenger car and sedan market, Subaru will continue to tilt its portfolio even further in the direction of light trucks, Takahashi said.

Sales in Europe increased 26 percent to 11,300 vehicles in the third quarter.

Under Subaru’s midterm business plan, the company aims to boost global sales above 1.2 million units in the fiscal year ending March 31, from 957,900 vehicles sold in the fiscal year ended March 31, 2016. Subaru expects North American sales to exceed 800,000 by then.

Lifting forecasts

Citing an improving exchange rate trend for the current quarter, Fuji Heavy lifted its full-year profit forecast for the current fiscal year ending march 31, after cutting it twice before.

The company now expects full-year operating profit to slump 28 percent to $3.51 billion, from last year’s record $4.85 billion. It had earlier predicted operating profit would take an even steeper dive to $3.2 billion this year.

Net income, meanwhile, is seen declining 34 percent to $2.49 billion.

Fuji Heavy had earlier predicted a 36 percent decline.

Fuji Heavy also lifted its global unit sales forecast to 1.07 million vehicles for the current fiscal year, on higher than expected volume in North America.

The new goal represents an 11 percent increase over the previous year.